Snap­ping up the big op­por­tu­ni­ties

Finweek English Edition - - INSIDE - BY MAR­CIA KLEIN

In the world of tech­nol­ogy, there are a l ot of new i deas but not nec­es­sar­ily the fi­nan­cial back­ing to take them for­ward. Stand­ing out from the crowd is not easy. But one lo­cal com­pany, Snap­plify, has man­aged to get on the radar of An­gelHub Ven­tures, a ven­ture cap­i­tal com­pany backed by for­mer First Na­tional Bank CEO Michael Jor­daan and his for­mer boss Paul Har­ris. An­gelHub has in­vested an undis­closed amount in the com­pany, which will be four years old in Oc­to­ber.

Snap­plify is an e-book ag­gre­ga­tor, which a i ms to make avail­able as broad a range of con­tent as pos­si­ble – from mag­a­zines, news­pa­pers, f ic­tion, text­books, comics and sheet mu­sic to old exam pa­pers. It al­ready dis­trib­utes for Pen­guin Ran­dom House, Pear­son, Ox­ford and Cam­bridge.

“It doesn’t mat­ter so much what it is, our aim is to make the process as sim­ple as pos­si­ble for the pro­duc­ers and read­ers and in the mid­dle of all that is a busi­ness model,” says Wes­ley Lynch, the CEO.

Lynch and four other founders have been work­ing to­gether as a team for 15 years and this was the last in a se­ries of en­deav­ours, but the f irst time they have brought in for­mal in­sti­tu­tional ven­ture cap­i­tal money and col­lab­o­rated with big­ger play­ers. This is their f irst busi­ness to have gained mass con­sumer mar­ket share, with 1.9m read­ers.

“This is the most broad, di­verse, am­bi­tious en­deav­our,” says Lynch. Snap­plify’s busi­ness has a bias to­wards English, African and emerg­ing mar­kets. About 20% of its busi­ness comes from the UK and US.

Text­books, es­pe­cially those used by pri­vate and in­ter­na­tional schools in Africa, are a big and grow­ing part of its busi­ness. Dif­fer­ent kinds of con­tent are sold in dif­fer­ent ways – from news­pa­pers to books with a long shelf l ife and text­books, which are sub­scribed rather than mar­keted. “Our ap­proach is very dif­fer­ent for each dif­fer­ent cir­cum­stance. It also de­pends on the ma­tu­rity of the mar­ket, mar­ket per­cep­tions of how dig­i­tal prod­ucts are sold and avail­abil­ity of credit cards.”

In ar­eas where peo­ple don’t have cards, Snap­plify has de­vel­oped pre­paid cards sub­scribers can buy to ac­cess

THIS IS THEIR FIRST BUSI­NESS TO HAVE GAINED MASS CON­SUMER MAR­KET SHARE, WITH 1.9M READ­ERS.

“SOUTH AFRICANS LOOK FOR IN­NO­VA­TION OUT­SIDE SOUTH AFRICA. WE NEVER HAD A PROB­LEM BE­ING TAKEN SE­RI­OUSLY IN NEW YORK, BUT HERE WE HAVE ONLY BEEN TAKEN SE­RI­OUSLY SINCE MICHAEL [JOR­DAAN]’S IN­VOLVE­MENT.”

con­tent. Con­tent can take the form of PDFs, in­ter­ac­tive e-books, video, and au­dio. Most pri­vate schools have e-text­books or are pi­lot­ing them.

“We a re not in t he i nfancy of adop­tion phase; we are just be­fore the very ver­ti­cal climb in adop­tion. This is the year of schools find­ing their feet and learn­ing the lessons, and then we will see the big push.”

At t he Fu­ture­Book In­no­va­tion awards, Snap­plify won the award for most in­no­va­tive tech­nol­ogy for its e-book dis­tri­bu­tion hard­ware, t he Snap­pBox. It works like a DStv de­coder for e-books. It is used by schools, which down­load books once f rom source and store them lo­cally on the de­vice rather than in the cloud, for chil­dren to down­load. And if there is no in­ter­net con­nec­tion, Snap­plify can pre­pop­u­late the box. There are dif­fer­ent sizes, but schools could store an en­tire cur­ricu­lum col­lec­tion on one box. Snap­pBox is the “de­liv­ery truck and ware­house” of the con­tent. In most cases it pro­vides the de­vice for free, and makes money from the sale of the books.

The busi­ness has grown quickly. Lynch and his part­ners came up with t he Snap­plify idea, built it out i n about three months and launched it at the Frank­furt Book Fair. “We were sur­prised at how ahead we were and how com­pet­i­tive we were in the mar­ket. We were lucky enough to spark in­ter­est with Ran­dom House, which signed up just be­fore Frank­furt so we signed up cus­tomers im­me­di­ately, and were gen­er­at­ing rev­enue and were prof­itable im­me­di­ately,” says Lynch.

One of the crit­i­cal things that made Snap­plify suc­cess­ful was the re­al­i­sa­tion of the need to strike while the iron is hot. They spun it out as a sep­a­rate com­pany, moved peo­ple around and in­vested money. “We pushed hard and when we were just four months old, we put an em­ployee in Lon­don and then a guy in New York. We needed to be taken se­ri­ously as a global player quickly.

“We fo­cused on be­ing a global busi­ness f rom day one. A l ot of com­pa­nies we work with, even South African pub­lish­ers, trav­elled to New York and signed with us and then re­alised we were from South Africa,” he says.

Get­ting the An­gelHub f und­ing pro­vides money to grow. Lynch has been in­volved in the ven­ture cap­i­tal space for some years, help­ing other com­pa­nies get funded and ad­vis­ing ven­ture cap­i­tal­ists,

es­pe­cially when there is a tech­nol­ogy an­gle in a deal.

There had been con­tact with Jor­daan and there “was re­spect and in­ter­est in what we do”. Then the tim­ing was right to have the con­ver­sa­tions. The deal was con­cluded in Oc­to­ber last year, but only an­nounced re­cently. “We have sim­i­lar out­looks on what we want to achieve; en­trepreneur­ship and ed­u­ca­tion is im­por­tant to him.”

Lynch will not re­veal the amount of the An­gelHub in­vest­ment, but says it will sub­stan­tially change the busi­ness’s prospects and it will get what it needs to main­tain its pace. “We re­ally are just around the cor­ner from real adop­tion and you need to be in po­si­tion to be in the right place at the right time, and mak­ing that mark is the dif­fer­ence be­tween suc­cess and fail­ure.”

Snap­plify is not unique, there is com­pe­ti­tion. It is not some­thing you can dive into with a bunch of techies, “it is quite new so there’s no best prac­tices to draw on. A lot is fron­tier in­no­va­tion.”

Big com­pa­nies don’t have the agility as pay­ment meth­ods and con­sumer be­hav­iour are chang­ing so quickly. And those com­pa­nies that are tech­ni­cally com­pet­i­tive are not very ex­pe­ri­enced in African mar­kets. “Our tech­nol­ogy might stand side by side, but we are so dis­tant and for­eign and off their radar. We have the con­text they don’t have, and the will.”

Lynch be­lieves giv­ing ad­vice to as­pir­ing en­trepreneurs is dif­fi­cult. With small and grow­ing busi­nesses, of­ten good and bad de­ci­sions and strate­gies are ex­actly the same thing. Whether they were good or bad just de­pends on the out­come. Nev­er­the­less, the clever­est thing they did was hav­ing the con­vic­tion to iden­tify Snap­plify as po­ten­tially high growth and spin it out.

“It can be daunt­ing to do, but you have to do it – jump in with both feet or do not bother at all. We put a guy in New York when the rand was weak­en­ing and on pa­per it didn’t look like the right thing to do. Mak­ing those de­ci­sions… if it works then you are la­belled clever and if it doesn’t you are id­i­otic.

“The big­gest t hing for us is a con­vic­tion and even a con­fi­dence,” he says, adding that it is not nec­es­sar­ily good to be ten­ta­tive or to try to do well in SA. Your mind has to be open to op­por­tu­ni­ties.

A huge chal­lenge is earn­ing re­spect in SA. “South Africans look for in­no­va­tion out­side South Africa. We never had a prob­lem be­ing taken se­ri­ously in New York, but here we have only been taken se­ri­ously since Michael’s in­volve­ment. Some clients meet our guy in New York, only to re­alise then that they could have driven down the road back in South Africa to get in con­tact with us. There is a lot of in­no­va­tion in South Africa that we don’t recog­nise and cel­e­brate.”

Wes­ley Lynch

From left to right: Suhaifa Naidoo, Shaun Mar­shall, Robert Dion­i­sio, Louan Jor­daan, Deb­o­rah But­ler, Elena Dotcheva, Gar­reth Wil­liams, Rox­anne de Swardt, Tar­ryn-Anne An­der­son, Wes­ley Lynch, Linda Jooste, Shaine Gor­don, Dane Woods, Tino­tenda Mun­dan­gep­fupfu

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